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Hedge Funds Keep Buying Cabaletta Bio, Inc. (CABA)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Cabaletta Bio, Inc. (NASDAQ:CABA) based on that data.

Cabaletta Bio, Inc. (NASDAQ:CABA) was in 9 hedge funds’ portfolios at the end of March. CABA has experienced an increase in hedge fund interest in recent months. There were 7 hedge funds in our database with CABA holdings at the end of the previous quarter. Our calculations also showed that CABA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the key hedge fund action regarding Cabaletta Bio, Inc. (NASDAQ:CABA).

How are hedge funds trading Cabaletta Bio, Inc. (NASDAQ:CABA)?

Heading into the second quarter of 2020, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in CABA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CABA A Good Stock To Buy?

More specifically, Adage Capital Management was the largest shareholder of Cabaletta Bio, Inc. (NASDAQ:CABA), with a stake worth $26.3 million reported as of the end of September. Trailing Adage Capital Management was Cormorant Asset Management, which amassed a stake valued at $15.4 million. Redmile Group, Deerfield Management, and Baker Bros. Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to Cabaletta Bio, Inc. (NASDAQ:CABA), around 0.71% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to CABA.

As industrywide interest jumped, specific money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Cabaletta Bio, Inc. (NASDAQ:CABA). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is  Renaissance Technologies.

Let’s now review hedge fund activity in other stocks similar to Cabaletta Bio, Inc. (NASDAQ:CABA). These stocks are Tecnoglass Inc. (NASDAQ:TGLS), Viemed Healthcare, Inc. (NASDAQ:VMD), VSE Corporation (NASDAQ:VSEC), and Fluidigm Corporation (NASDAQ:FLDM). All of these stocks’ market caps are closest to CABA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TGLS 5 6805 0
VMD 7 8912 -1
VSEC 4 1723 -1
FLDM 16 42366 -2
Average 8 14952 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $69 million in CABA’s case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand VSE Corporation (NASDAQ:VSEC) is the least popular one with only 4 bullish hedge fund positions. Cabaletta Bio, Inc. (NASDAQ:CABA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but beat the market by 15.9 percentage points. Unfortunately CABA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CABA were disappointed as the stock returned 7.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.